Background
Following the wider reopening of the construction industry in Melbourne, it may be an appropriate time for many principals and contractors to revisit their construction contracts to understand their rights and obligations with respect to extension of time and delay damages.
For the purposes of this note we review the relevant clauses set out in an unamended AS 4000-1997/AS 4902-2000 and AS 2124-1992/AS 4300-1995. We note, however, that it is common for parties to amend these standard form documents, and that these amendments may affect their respective rights and obligations in relation to COVID-19 issues.
Executive Summary
The general position under the unamended AS 4000-1997/AS 4902-2000 and AS 2124-1992/AS 4300-1995 is as follows. As a general rule of thumb the risk profiles are similar under AS 4000-1997/AS 4902-2000 and AS 2124-1992/AS 4300-1995.
Under AS 4000-1997/AS 4902-2000 :
A COVID-19 delay such as industry shutdown or capacity limits may be a change in legislation that could not have been reasonably anticipated. If so:
(a) there is no express right for the contractor to be entitled to an EOT. It is arguable that the Superintendent will be obliged to give one despite there being no express right as part of their discretion; and
(b) the contractor may be entitled to additional costs (but arguably no margin), but only if Annexure Part A lists the affected WUC. If no WUC is listed in Annexure Part A, then the contractor will not be entitled to additional costs. This is a critical point to check for each specific contract.
Under AS 2124-1992/AS 4300-1995:
A COVID-19 delay such as industry shutdown or capacity limits may be a change in law and delays/directions by authorities that could not have been reasonably anticipated. If so:
(a) the contractor is entitled to an EOT;
(b) the contractor is entitled to additional costs (plus margin) for changed work methods; and
(c) there is no express right to delay damages unless stated in Annexure Part A, but these costs may be included in the assessment of changed work methods per the paragraph (b) above.
Regardless of whether the contractor is able to claim an EOT, it is still obliged to give a notice of delay should one occur. If it is entitled to an EOT, then it must give notice per the procedure in the contract.
HWL Ebsworth Lawyers has expertise in advising principals, contractors and subcontractors on extension of time claims and delay damages claims. Please contact Leighton Moon of our Construction and Infrastructure team to discuss any aspect of the above.
AS 4000-1997/AS 4902-2000
Pandemics/force majeure
AS 4000-1997/AS 4902-2000 does not include any clauses specifically dealing with pandemics or force majeure events.
Authorities and Legislative Requirements
Under the AS 4000-1997/AS 4902-2000 a contractor is entitled to costs for changes in legislation if that change affects the Works or any WUC stated in Annexure Part A.
A COVID-19 delay will not affect the physical works – just the WUC that a contractor must perform to complete those physical works. Therefore, a contractor will only be entitled to additional costs if there is WUC stated in Annexure Part A. Put another way, if there is no WUC stated in Annexure Part A, the contractor will not be entitled to costs.
There is arguably no right to a margin for profit on top of these costs. There is no right to an EOT.
Delays by Authorities
AS 4000-1997 / AS 4902-2000 does not include any clauses specifically dealing with delays caused by Authorities.
This is a risk allocated to the contractor.
AS 2124-1992/AS 4300-1995
Pandemics/force majeure
AS 2124-1992/AS 4300-1995 does not include any clauses specifically dealing with pandemics or force majeure events.
Authorities and Legislative Requirements
Under clause 35.5 of AS 2124-1992/AS 4300-1995 the contractor is entitled to claim an EOT for:
(a) changes in the law;
(b) directions by public or statutory authorities; and
(c) delays by public or statutory authorities.
These would likely apply to a COVID-19 delay, and so the contractor will be entitled to an EOT.
If a contractor is or will be delayed in reaching Practical Completion by such a cause and within 28 days after the delay occurs the contractor gives the Superintendent a written claim for an EOT, the contractor shall be entitled to an extension of time for Practical Completion.
Under clause 14.1 and 14.2, a contractor is entitled to be paid for a variation where a statutory requirement (including a direction given by persons exercising their statutory powers) which necessitates a change in the contractor’s method of working. If this change causes the contractor to incur more costs, the difference shall be valued as if it was a variation (ie with a margin) under clause 40.5.
This would likely apply to a COVID-19 delay, and so the contractor will be entitled to its additional costs plus a margin. Although there is no express right to claim delay damages for these delays under clause 36, it is likely that an assessment of the variation in the paragraph above would include some or all of such delay costs – either in the cost of the work or the margin.
Additionally, if a change in statutory requirements necessitates a change to the method of working, as may be specified in the contract, the superintendent shall direct a variation under clause 40.1. This would then entitle the contractor to an EOT pursuant to clause 35.5(b)(iv).
Our team of Construction and Infrastructure lawyers have significant expertise to assist you to understand your rights and obligations under your construction contracts with regards to extensions of time and entitlements to costs.
This article was written by Leighton Moon, Partner, and Fin Neaves, Associate.
